BioWorld International Correspondent

MUNICH, Germany - The year's first major venture capital biotech investment in Germany went to Graffinity Pharmaceuticals AG, which closed a €15 million third round of funding. The company will use the funds to finance its in-house drug discovery programs, support its technology platform and pursue what Graffinity called "corporate development opportunities."

"We are steadily moving Graffinity forward from its original technology platform to a drug discovery and development company," Klaus Schollmeier, the Heidelberg-based company's CEO, told BioWorld Today. "This round of financing will allow us to move our two key programs forward into testing. It will also give us the flexibility to choose which one to take into the clinic ourselves and which one to seek a partner for."

Graffinity's two lead products, an orally available thrombin inhibitor and an orally available DPP4 inhibitor, have reached an advanced preclinical stage of development. The first targets thrombosis, the second, diabetes.

"We are targeting orally available therapies in both areas, because after 20 years of frustrating research, there has been success and the field is experiencing a tremendous renaissance," Schollmeier said. "We are looking for better compounds and aiming to hit the sweet spot with these programs. At this point, our patented chemistries look quite exciting."

Schollmeier added that the company intended from the beginning that its technology platform would give it a head start in drug discovery. The new investment aims to move the company forward as a discovery and development company.

"It was always clear that we wanted to be a drug discovery company, so the programs naturally arose in the course of these developments," Schollmeier said. "We've chosen these targets because they are very well validated, but we believe there is substantial room for improvement on the chemical side."

Graffinity's business plan follows two tracks. "We have a platform that has reached maturity stage," Schollmeier said. "We are offering it on a fee-for-service basis and developing a business unit around the platform." Over the last nine months, the company has been building medical chemistry capabilities that are growing into a drug discovery unit.

"We hope that in the course of this year, we would partner one of the programs, and that the other will be in the clinic by 2006," Schollmeier said. "We are looking for a partner whose capabilities are complementary to our strengths in chemistry and computational discovery."

Schollmeier said that the current financing is enough to support the company's activities at least into the second half of 2005. Also, the capital gives Graffinity the ability to seek mergers and acquisitions, with Schollmeier saying Graffinity expects to team up with others.

Merlin Biosciences, of London, led the round, and all of the company's previous institutional backers made additional investments. Carnegie Asset Management, of Copenhagen, Denmark, joined the syndicate as a new investor.

Graffinity was founded in November 1997. With the completion of the round of financing, it has raised more than €50 million in capital.